Tor stands for The Onion Router project.
The Onion Router (TOR) is a non-profit setup which runs a network designed to improve personal privacy and increase anonymity online by masking Internet traffic, as well as preventing online domains from gathering information about you and your browsing habits.
Tor is used by people who are privacy-conscious -- especially after Edward Snowden's disclosures about the NSA, In addition, the network is used by journalists, people avoiding censorship, businesses and traders in underground markets. You can only access the underbelly of the Internet, known as the "Deep Web" and .onion web addresses -- which are not indexed by standard search engines -- through Tor.
Tor uses relays and nodes ran by volunteers to disguise your traffic and the true origin of your IP address, a de facto network of tunnels rather than a direct line to websites you visit. Instead of sending packets of data directly to a server, this information is bounced to different relay points. By doing so, the network helps you disguise your digital footprint and keep out spying eyes.
The answer is no. Tor is only a traffic anonymizer and does not encrypt your traffic, but the use of virtual private networks (VPNs) in addition to Tor and staying away from HTTP-based websites will help. Use HTTPS whenever possible.
Tor is free and open-source with a number of developers working on the network, which is compatible with Windows, Mac, Linux/Unix, and Android.
The "clear web" is the layer of the Internet which is indexed by search engines including Google. Underneath, you have the "deep web" and "dark web," the latter of which is associated with illegal operations.
Onion addresses are part of the "deep web," and to access them, you need to know the 16-character code instead of a standard URL. You can find these through deep web search engines, forums and through invitations -- and some companies, such as Facebook, have issued .onion addresses for Tor users.
If you're going to use Tor, you need to understand some of the basics of Internet security. As a standard tip, disable plugins and software which could leave you open to exploit, such as Flash and Java.
You should keep in mind that Tor does not prevent you from operating system security vulnerabilities -- and considering how many flaws are found in software on Windows, you may want to use a different OS to stay as protected as possible.
There are still ways that police agents can scrutinize your activity, so do not consider yourself 100 percent protected just because you are using Tor. If you visit illegal domains, buy or sell illegal goods or download explicit, banned material, Tor may not protect you.
If you want to help anonymize your traffic, do so -- but for tasks which need a high Internet speed such as torrenting, this is not the right solution. In addition, if you want to use the network for illegal activity, this is at your own risk.
Do not consider Tor as the ultimate solution to security -- it is, instead, one aspect. VPNs and sticking to HTTPS are also important components to protecting yourself and your data.